What I say unto you I say unto all, watch. Mark 13:37

December 23, 2010

Fresh humiliation for eurozone as China says it will bail out debt-ridden nations

China has said it is willing to bail out debt-ridden
countries in the euro zone using its $2.7trillion overseas investment fund.

In a fresh humiliation for Europe, Foreign Ministry spokesman
Jiang Yu said it was one of the most important areas for China’s foreign
exchange investments.

The country has already approached struggling European
countries with financial aid, including offering to buy Greece’s debt in October
and promising to buy $4billion of Portuguese government debt.

Today Portugal had its credit rating downgraded by the Fitch
Ratings agency amid mounting concerns over the country’s ability to raise money
in the markets to finance its hefty borrowings.

Fitch said it was reducing its rating on the country’s debt
by one notch to A+ from AA- and warned that further downgrades may be in the
offing by maintaining its negative outlook.

‘To have any discernible effect China will have to buy a lot
more than 5 billion euros if they expect to have any impact on the negative
sentiment surrounding Europe,’ said Michael Hewson, currency analyst at CMC
Markets.

China’s astonishing economic growth has put it on track to
overtake America as the world’s economic powerhouse within two years, a recent
report claimed.

But experts believed still be some years before America’s
leadership role is really challenged - largely because Beijing has given no
indication it is ready to take on the responsibility of shepherding the world’s
economy.

This foray into the future of the euro could be a signal from
Beijing that it is ready to change that perception.

The euro rose temporarily on the news of China’s support -
but was sinking again this morning to a three-week low against the dollar.

The single currency earlier fell to around $1.3050, below its
200-day moving average currently located at $1.3092 on trading platform EBS.

Investors have pushed the euro beneath this key support level
for the past three sessions, only to see the currency bounce back later in the
day.

THE LOCOMOTIVE DRIVING THE WORLD ECONOMY

China could overtake America as the world’s biggest economy
within two years, according to a leading financial think tank.

As growth in the U.S. slows down to a virtual standstill,
China’s economy is revving up into double digits, the Conference Board said in a
report published today.

In purely dollar terms, it is going to take much longer than
two years for China’s $5 trillion economy to match up to the $15 trillion output
in the US.

Even if the Chinese can sustain their current growth, it
would take another ten years.

But in terms of purchasing power, taking into account the
goods and services a country actually buys at home, China is well on its way to
outstripping its fading competitor.

Looking even further ahead, the Conference Board predicts
China could account for almost one quarter of the global economy in 2020,
compared to 15 per cent for the US and 13 per cent for Western Europe.

The board predicted China’s economy should grow 10 per cent
this year and 9.6 per cent in 2011, while America’s 2.6 per cent growth in 2010
will sink to 1.2 per cent next year.

Analysts said the euro will likely hold above $1.30 in the
coming days, with traders reluctant to place big bets before year-end.

The outlook for the single currency remains shaky, with fresh
losses expected into 2011, they added.

The Financial Times reported yesterday that China had
offered to take more ‘concerted action’ to support European financial
stabilisation.